Trump's threat of auto tariffs opposed by industry, Republicans

Automobiles are seen for sale in a car lot in Great Neck , N.Y., on Thursday. (REUTERS/Shannon Stapleton)

President Donald Trump’s threat to impose tariffs on auto imports drew strong criticism abroad and at home where U.S. business groups and members of his own Republican Party warned of damage to the industry and raised the prospect of a global trade war that would harm American interests.

The Trump administration opened a trade investigation on Wednesday into whether vehicle imports had damaged the U.S. auto industry. That could lead to tariffs of up to 25 percent on the same “national security” grounds used to impose U.S. steel and aluminum duties in March.

Governments, lawmakers, auto companies and industry groups from Asia to Europe to Canada and in the United States pushed back hard against the move, with many saying it would add to consumer costs and hurt jobs. The country’s largest auto union gave muted support for the investigation.

“If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war,” U.S. Chamber of Commerce President and Chief Executive Officer Thomas Donohue said in a statement. The influential lobbying group’s head urged the administration to reverse course.

U.S. Commerce Secretary Wilbur Ross said on Thursday the investigation was still in its early stages but that other countries’ high, artificial barriers, such as tariffs and other interventions, have skewed the marketplace.

“Now it’s very difficult to get back to a reciprocal arrangement,” Ross said in an interview on CNBC, a day after announcing the investigation.

The Alliance of Automobile Manufacturers, the trade group representing major U.S. and foreign automakers, indicated it did not favor the move, urging the administration to “remove barriers to free trade” and saying it was confident that vehicle imports do not pose a national security risk.

Last year, 13 domestic and international automakers made nearly 12 million vehicles in the United States, it said, and “the sector remains the leading exporter of manufactured goods in our country.”

The United States exported nearly 2 million vehicles worldwide worth $57 billion last year, according to U.S. government statistics. At the same time, it imported 8.3 million vehicles in 2017 worth $192 billion, including 2.4 million from Mexico, 1.8 million from Canada, 1.7 million from Japan, 930,000 from South Korea and 500,000 from Germany.

Canadian Prime Minister Justin Trudeau said the U.S. decision was based on flimsy logic and clearly linked to talks to modernize the North American Free Trade Agreement (NAFTA) between Canada, the United States and Mexico. Tariffs would shave 0.16 percent off the economic output of Germany, Europe’s largest economy, the influential Ifo think tank said. “No other country has higher absolute losses to fear than Germany,” said Gabriel Felbermayr, foreign trade expert at Ifo.

Together, German carmakers BMW, Daimler AG and Volkswagen AG control more than 90 percent of the North American premium auto market.

German Finance Minister Olaf Scholz said the European Union should be united in its response to the threat of U.S. tariffs.

The probe comes ahead of midterm elections in the United States in November that will determine whether the Republican Party retains control of Congress. It is seen as part of Trump’s “America First” promise to win back manufacturing jobs lost to overseas competitors.

United Auto Workers union President Dennis Williams said he supports Trump’s trade policies and his efforts to protect American workers from competition from low-wage countries.

But he said that did not mean the UAW was ready to support Republicans running for Congress this year. “The Republican Congress and Senate, they have totally ignored the needs of working men and women in this country,” Williams said.

Several congressional Republicans criticized the investigation amid a trade spat with China, saying it was being pursued under false pretenses and could hurt American consumers.